® FSS Update Rosa Fulton Executive Director, FSS MTAC May 20, 2010

2 FSS Update  Flat Volume Update  Respond to Industry Questions ● Program Status  FSS Redirection – Phase 1B Agenda

3 FSS Update Flat Volume Trend – 2001 Through 2009 RPW Flat volume decline FY % FY 2005 – FY 2009 Flat volume decline 26% 14.3 billion fewer flats annually FY 2005 – FY 2009 Flat volume decline 26% 14.3 billion fewer flats annually

4 FSS Update Flat Volume Trend – QTR 1, FY 2010 RPW QTR 1, 2010 Flat volume decline -14.9% QTR 1, 2010 Flat volume decline -14.9%

5 FSS Update Flat Volume Trend – FY 2010 YTD RPW FY 2010 YTD Flat volume decline -10.7% FY 2010 YTD Flat volume decline -10.7%

6 FSS Update Flat Volume March 2010 Compared to SPLY RPW

7 FSS Update FSS Questions 1. What exactly is happening with the machines?  Program Status  Redirection – Revised Deployment

8 FSS Update  Sequencing Operations  Dulles – 4 FSS  Columbus – 2 FSS  Kansas City – 2 FSS  Phoenix – 3 FSS  South Florida – 1 FSS FSS Operations FSS Site # FSS On-line # Delivery Units On-line # Zones On-line Dulles P&DC44985 Columbus FSS Annex22430 Kansas City P&DC21844 Phoenix L&DC31137 South Florida1515 Totals

9 FSS Update FSS SiteMachine #Start of Operations SOUTH FLORIDA L&DC 1st May 3, 2010 NEW JERSEY NDC 1st July 12, 2010 SOUTH FLORIDA L&DC 2nd July 12, 2010 NEW JERSEY NDC 2nd August 2, 2010 NW BOSTON MA P&DC 1st August 2, 2010 SOUTH FLORIDA L&DC 3rd August 2, 2010 MID-ISLAND NY P&DC 1st August 16, 2010 NW BOSTON MA P&DC 2nd August 23, 2010 NEW JERSEY NDC 3rd August 23, 2010 SOUTH FLORIDA L&DC 4th August 23, 2010 CURSEEN-MORRIS DC P&DC 1st September 7, 2010 MID-ISLAND NY P&DC 2nd September 7, 2010 NW BOSTON MA P&DC 3rd September 13, 2010 NEW JERSEY NDC 4th September 13, 2010 SOUTH FLORIDA L&DC 5th September 13, 2010 CURSEEN-MORRIS DC P&DC 2nd September 27, 2010 MID-ISLAND NY P&DC 3rd September 27, 2010 Operation Start Dates – Next Sites Operational

10 FSS Update Installation & Operations Progression  October 2010 – 29 FSS operational in 9 locations  April 2011 – all machines installed  June 2011 – all machines operational

11 FSS Update FSS Redirection – New Deployment Plan  Original deployment plan 100 FSS in 32 sites  Phase 1A - 19 FSS identified for redirection  Deploy fewer FSS in 10 sites  Phase 1B – 5 FSS identified for redirection  Deploy fewer FSS in 5 sites  May 2010 – 47 FSS sites

12 FSS Update Phase 1B Recommended Redirections  5 additional FSS machines planned for redirection New FSS sites # FSS Brooklyn NY P&DC1 San Francisco P&DC1 Dallas P&DC1 Pittsburgh PA L&DC1 Cleveland OH FSS Annex1 Total 5 Sites receiving fewer FSS # FSS Indianapolis IN1 Denver CO1 Middlesex-Essex MA1 Providence RI1 Sacramento CA1 Total 5 Total of 47 FSS locations

13 FSS Update FSS Questions 2. What is the current ROI and has it affected the old DAR thus they cannot reorder more machines or have other impacts besides money issues? ● Declining volume does impact the savings potential  Program expectation of 280,500 pieces per day ● Increasing the number of runs decreases number of pieces that can be processed daily  Lower throughput at lower run volumes / fixed changeover times - closer to 255,000 pieces per day ● Phase 1 technology designed for larger volumes ● Technology solutions to gain back efficiencies are in review ● Achieving savings today beyond sequencing flats— capturing space & redeploying vehicles ● Limited capital funds available for new technology

14 FSS Update FSS Questions 3. Is there money allocated for future machines? If so, what does Phase II deployment look like in terms of facilities to be placed at (type of facility in terms of volume) and timeline? ● Phase 1 FSS satisfies only 1/4  1/3 of national flats sequencing opportunity ● Additional savings opportunity exists for expanding beyond Phase 1 ● Delivery point sequencing (100%) is a fundamental strategy of the “Delivery of the Future” vision ● Maximum effectiveness / efficiency achieved when sequencing process housed in same facility as upstream bundle and flats sorting operations

15 FSS Update FSS Questions 4. What is the future strategy of the USPS in terms of FLAT mail overall, which includes all FLAT machines and deployments? ● Optimize savings potential for Phase 1 ● Extend flats sequencing beyond Phase 1 ● Bypass bundle distribution ● Automate flat mail preparation ● Create critical mass ● Improve utilization & efficiencies of AFSM 100s

16 FSS Update FSS Redirection – New Deployment Plan

17 FSS Update FSS Deployment – 100 FSS, 47 FSS Sites Van Nuys, 3 Los Angeles, 2 Moreno Valley, 2 Anaheim, 2 San Diego, 2 Miami, 5 Sacramento, 1 San Jose, 4 Phoenix, 3 Denver, 3 Orlando, 2 Houston, 1 Minn St Paul, 2 Greensboro, 1 Raleigh, 1 Charlotte, 1 SE Mich, 2 Atlanta, 2 North Metro, 2 Palatine, 4 Fox Valley, 2 Carol Stream, 1 South Suburban, 2 Indy, 1 Columbus, 2 Kansas City 2 Linthicum MD, 1 Dulles VA, 4 Washington DC, 2 Philadelphia & NDC, 3 Providence, 2 Newark NJ, 4 Trenton NJ, 3 NW Boston, 3 Middlesex, 3 Springfield, 4 Richmond, 3 Rochester, 2 Brooklyn, 1 Mid Island, 4 Westchester, 1 Stamford, 1 Dallas, 1 San Francisco, 1 Pittsburgh, 1 Cleveland, 1

18 FSS Update Conclusion